Council tax cannot tackle funding shortfall on its own

Councils have argued that council tax cannot be the sole answer to filling a multi-billion shortfall over the next three years and that a substantial injection of funding is needed to prevent major cuts to services.

County Councils Network analysis of the financial plans of its 36 member councils finds that those authorities face a £2.8 billion funding shortfall over the next three years even if council tax bills rise by 1.99 per cent every 12 months.

With proposals expected to allow councils to levy higher council tax bills to address their shortfall without the need for a referendum, the CCN says that it would take yearly rises of up to 7.99 per cent to almost eliminate their deficit as an alternative to major service cuts. Increases on such a scale would add £392 onto an average county family’s bill over the next three years.

But with the cost of living rising, council leaders say a cumulative rise of almost 24 per cent in council tax would be ‘unacceptable and unfair to residents. A rise of this scale would mean that the average Band D bill would be over £2,200 in every county area by 2025: averaging £2,386 per year.

CCN’s analysis, compiled by looking at the financial plans for all its member authorities, finds that their councils face £2.8 billion funding shortfall over the next three years, even if council tax rose at 1.99 per cent each year by 2025. Those councils predict that the legacy of coronavirus will impact on their budgets in future years, on top of existing cost and demand pressures.

Carl Les, Finance Spokesperson for the County Councils Network, said: “County local authorities face an extremely difficult three years coming up, with rising costs of delivering services, demographic pressures, and the legacy of Coronavirus meaning that we need to find savings or increased income of £2.8 billion over the next years to balance our books.

“We are acutely aware that the cost of living is rising and that many households have suffered from the economic impact of the pandemic. Therefore, large-scale council tax rises to make up our funding shortfall would be unacceptable and unfair for hard-pressed residents. It would also be an unsustainable approach to funding services, raising variable amounts across the country.

“We appreciate the tight fiscal environment facing the Chancellor, but we are calling on the government to inject further funding into the system for local authorities over the next three years, in order to avoid a further round of large-scale reductions in services. The government’s levelling-up agenda must begin with making public services adequately funded.”